Exercise 4-8 (20 minutes)
1. The estimated total manufacturing overhead cost is computed as
follows:
Y = $750,000 + $4.00 per MH × 150,000 MHs
Estimated fixed manufacturing overhead …………….
$ 750,000
Estimated variable manufacturing overhead
$4.00 per MH × 150,000 MHs …………………………
600,000
Estimated total manufacturing overhead cost ……….
$1,350,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……..
$1,350,000
÷ Estimated total machine-hours (MHs) ……..
150,000
MHs
= Predetermined overhead rate ………………..
$9.00
per MH
2. Total manufacturing cost assigned to Job 500:
Direct materials …………………………..
$350
Direct labor ………..………………………
230
Manufacturing overhead applied
$9.00 per MH × 30 MHs ……………..
270
Total manufacturing cost ……………….
$850
3. Computing underapplied/overapplied overhead:
Actual manufacturing overhead (a) …….
$1,325,000
Actual machine-hours ………………………
147,000
× Predetermined overhead rate …………
$9.00
= Manufacturing overhead applied (b) ..
$1,323,000
Underapplied overhead (a) – (b) ………..
$ 2,000
Manufacturing overhead underapplied …
$2,000
The increase cost of goods by $2,000 would decrease net operating
income by $2,000.
